The Rating Outlook on the long-term ratings is Stable. The EMCP rating
does not carry an Outlook.

SECURITY

The state's full faith, credit, and taxing powers, as well as the
statutory irrevocable appropriation of a first lien on all state
revenues for debt service, secure the GO bonds.

KEY RATING DRIVERS

BROAD, DIVERSE ECONOMY: The Wisconsin economy is broad and diverse with
considerable economic resources, albeit with an above-average
manufacturing presence.

FISCAL PROGRESS UNDERWAY: The state's finances have strengthened, with
recent structural budget solutions and solid revenue gains resulting in
materially stronger liquidity. The state has not yet returned to
consistent structural balance as of its fiscal 2013-2015 adopted budget
although year-to-date revenue performance is strong.

LIMITED RESERVES: The state's reserves, which were depleted in the last
downturn, have begun growing again but remain modest. If the revised
revenue performance is realized and not offset by change in tax policy,
the reserve position is forecast to improve over the course of the
biennium.

MODERATE LIABILITIES: State tax-supported debt is a moderate though
above-average burden on resources. Retiree obligations are minimal, with
pensions fully funded and limited other post-employment obligations.

NOTES CARRY GO PLEDGE: EMCP notes are general obligations of the state;
outstanding notes have never been extended. Resolutions authorizing
long-term bond issuance to fund the notes have been executed.

RATING SENSITIVITIES

CONTINUED FISCAL IMPROVEMENT: A demonstrated commitment to growing
reserve funding and consistently achieving structurally sound budgets in
the context of moderate debt and low retiree obligations could result in
a rating upgrade.

The adopted budget for the fiscal 2013-2015 biennium (which began on
July 1, 2013) relied on substantial use of the fiscal 2013 ending
balance to achieve budgetary balance in fiscal 2014 and 2015. An upward
revenue revision in January 2014, which reflected strong revenue
performance year-to-date and slightly higher economic growth, would
produce a surplus for fiscal 2014 and 2015 without use of ending
balance, assuming changes in tax policy do not offset the revenue gains.

FINANCES

In past biennia the state's practice was to rely on nonrecurring items
and fund shifts in times of revenue weakness to achieve budgetary
balance. The adopted budget for the fiscal 2011-2013 biennium (which
ended on June 30, 2013) marked a notable departure from the past, with
deep structural cuts, including to employee benefits and local aid, to
achieve balance. With the exception of debt refunding for budget relief
in fiscal 2012, the budget avoided a reliance on nonrecurring resources
and repaid longstanding budgetary obligations. Budget performance in
fiscal 2013 was considerably stronger than anticipated, reflecting
better than expected tax receipts.

The BSF, which had been minimally funded for much of the last decade,
benefitted from general fund revenue over-performance during the
biennium, with a deposit of $108.9 million from fiscal 2012 and
approximately $154 million from fiscal 2013, which brought its balance
to $279.3 million (about 2% of fiscal 2013 general-fund tax receipts).
Wisconsin statute requires that half of revenues in excess of the
adopted forecast be transferred to the BSF. If revenue continues to
perform as currently anticipated, and without consideration of a tax cut
proposed by the governor, the state would be required to deposit an
additional $443 million to the BSF by the end of the current biennium.
The excess would be significantly reduced under the proposed
legislation. In its consideration of this legislation, the legislature
has proposed suspending transfers to the BSF for fiscal 2014 and 2015,
leaving any balance to be retained in the general fund.

The adopted budget for fiscal 2013-2015 incorporated sizable personal
income tax (PIT) rate cuts taking effect in tax year 2013. PIT tax rate
changes were estimated to reduce general fund revenues from baseline
levels by $328 million in fiscal 2014 and $320 million in fiscal 2015.
The state's outlook for tax revenue collections during the fiscal
2013-2015 biennium appears reasonable, particularly given recent upward
revisions in estimated fiscal 2013 performance. As of the January 2014
revised forecast, fiscal 2014 general fund tax revenues are now expected
to show modest 2.2% year-over-year growth to $14.4 billion, followed by
strong 4.3% growth in fiscal 2015, to $15.5 billion.

Under the adopted fiscal 2013-2015 budget, general fund net
appropriations rise 3.6% in fiscal 2014, to $14.8 billion, and 3.8% in
fiscal 2015, to $15.4 billion. The spending plan included changes to
state Medicaid eligibility in response to federal health reform, higher
school formula funding and flat aid to local governments.

With the revised revenue forecast, the ending net balance is projected
to increase from $694.2 million at June 30, 2013, to $831.8 million in
fiscal 2014 and $976.5 million in fiscal 2015, despite absorbing the PIT
rate change and higher spending needs. The forecast ending balance is
almost $900 million higher than anticipated when the budget was enacted.
The governor is proposing several tax law changes, the largest of which
would provide property tax relief in support of the Technical College
System. The governor has also directed the department of revenue to
adjust income tax withholding tables to reflect lower tax rates, which
will cause a one-time loss of state revenues due to differences in
timing between the state's fiscal and tax years. If enacted, these
changes would significantly reduce the projected surplus and suspend
deposits to the BSF. Fitch will assess the impact of any additional
changes in tax policy in the context of the state's ability to achieve
structural budget balance and maintain sufficient reserves.

ECONOMY

Wisconsin benefits from a diverse economy, although its large
manufacturing sector has been a source of vulnerability. The state's
recovery from the recession has been slow and uneven. After performance
in line with that of the U.S. during the downturn, 2012 employment
growth was about half the U.S. pace. Employment growth, which continued
to lag the U.S. through much of 2013, has improved in recent months with
December 2013 employment up 1.6%, matching the U.S. overall.

Unemployment, at 6.2% in December 2013, remains below the 6.7% national
rate. Wisconsin ranked 26th in personal income per capita in 2012, at
95% of the U.S. average. The state forecasts slow employment and
personal income gains through 2015, its forecast period, which Fitch
believes to be reasonable.

DEBT AND OTHER LIABILITIES

Net tax-supported debt of approximately $13.3 billion as of Dec. 15,
2013 measures 5.5% of 2012 personal income, a moderate but above-average
level. Debt has grown in recent years, including $1.5 billion in general
fund annual appropriation bonds issued in early 2009 to provide budget
relief by purchasing tobacco settlement revenues previously sold to the
Badger Tobacco Asset Securitization Corporation. A further $1.8 billion
in general fund annual appropriation bonds were issued in 2003 for
pension funding. More than half of tax-supported debt is GO, with the
remainder consisting of various revenue and appropriation credits. The
state's improving cash balances made it unnecessary to utilize cash flow
borrowing during fiscal 2013, and none is expected through the fiscal
2013-2015 biennium.

The state's limited retiree obligations are a credit strength. Pensions
were fully funded as of Dec. 31, 2012, the valuation date in the
statewide system's most recent comprehensive annual financial report. On
a combined basis, the state's net tax-supported debt and pension
obligations measure 5.5% of personal income, below the median for U.S.
states rated by Fitch. OPEB obligations are limited.

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